An introduction to the fundamentals of dynamic business law and business ethics chap007

Chapter 7 Case HypotheticalDavidson’s Microbrew, Inc. is a small beer manufacturer located in Denver, Colorado. The owner ofDavidson’s Microbrew, Benjamin Davidson, takes great pride in offering the public a variety of beers,including a particular one that is currently the subject of litigation. “Barley-Davidson” is a dark brewclosely resembling motor oil in its appearance. For the past three (3) years, Barley-Davidson hasbeen sold in orange cans. There is a “bar-and-shield” logo on the can’s front closely resembling theiconic Harley-Davidson logo; in the “bar” portion of the logo, the “Barley-Davidson” name appears,and the words “Asphalt-Dark Beer” appear in the “shield” portion of the logo. On the back of the can,in small but legible print, the following disclaimer appears: “Not affiliated with Harley-Davidson MotorCompany.” Barley-Davidson has become Davidson’s Microbrew’s most popular product, sellingapproximately 250,000 units per year.In its lawsuit against Davidson’s Microbrew, Harley-Davidson has requested an injunction (temporary,

pending litigation, and permanent, post-litigation) and money damages based on all profits generatedby the defendant in its sale of Barley-Davidson. Davidson’s Microbrew’s defense is based on four (4)contentions: first, its product (beer) is distinguishable from Harley-Davidson’s product (motorcycles);second, its product disclaimer (indicating its non-affiliation with Harley-Davidson Motor Company) isdisplayed on every can of Barley-Davidson it sells; third, the “Barley” portion of its dark beer’s namehas nothing to do with Harley-Davidson; and four, the “Davidson” portion of the beer’s name isproudly associated with the name of the microbrew’s company, and the last name of the microbrew’sfounder himself.What is the likely result of the litigation?7-2

Chapter 7 Case HypotheticalBernie Sides is a restaurant entrepreneur and an avid Civil War buff. Over theyears, Bernie has collected a “treasure trove” of Civil War memorabilia, and hedecides to combine his passions for restaurant ownership and Civil War historyby opening a new restaurant called the “Hardtack Café” (“hardtack” is a hard,unsalted biscuit used as a staple for Civil War army rations.) Sides has deviseda logo for the restaurant, and the logo (a yellow circle with red lettering for thename of the restaurant) bears a striking resemblance to a certain “rock and roll”themed restaurant of a similar name and logo.Upon discovering the existence of the new restaurant, attorneys for the rockand roll restaurant immediately sue, requesting 1) a temporary injunction (acourt order mandating that the Hardtack Café cease and desist from using itsname and logo, pending the outcome of the litigation; 2) a permanent injunction(a court judgment that the Hardtack Café forever cease and desist from usingits name and logo;) and 3) money damages representing all profit the HardtackCafé has earned during its existence.Who wins, and why?

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Chapter 7 Case HypotheticalThe American Pistol Association (APA), a gun-rights activist organization, is headquartered in Laramie, Wyoming. TheAPA held a ceremonial luncheon at its headquarters, and invited a host of Second Amendment advocates, includingthe former governor of Wyoming, Sara M. Caine. Dubbed “The Renegade” by her avid supporters, most believed thatSara would make a presidential run in the next election. Known more for her public proclamations than her actualgoverning acumen, Sara is most-remembered for leading a gun-rights demonstration in Wyoming’s state capital,Cheyenne, at which time she held her Chesterfield rifle above her head and announced that before government

officials took her gun away, they would first have to deal with her “sharp, red fingernails!”As a key part of the ceremony, the APA honored Sara M. Caine’s efforts to uphold the Second Amendment. The APA’spresident, Charles T. Hess, presented Sara with a “Bronco 55” pistol, proudly manufactured in the United States ofAmerica. Sara enthusiastically accepted the Bronco 55. After the ceremony, Charles approached Sara and informedher that although his organization had planned to get the gun engraved with her initials on each side of its ivory handlebefore the presentation, the person they had chosen to do the work, Edward “Wild Eddie” Cody, had been away onvacation. He further told Sara that if she would hand the gun to him, he would get Wild Eddie to engrave the gun whenhe returned from vacation, and return it to her as soon as possible. Sara happily agreed, and transferred the gun toCharles.Charles put the gun in his office desk at APA headquarters. That night, an unknown perpetrator burglarized APAheadquarters, taking only the Bronco 55. Charles suspected the thief was Jean Gigot, a vocal, well-known opponent ofgun rights who had moved from Dijon, France to Laramie several months ago. During his presentation of the Bronco55 to Sara, Charles had observed Jean lurking in the back of the dining room, furtively and feverishly pacing back andforth.From a legal standpoint, must The American Pistol Association or Charles T. Hess answer to Sara M. Caine for thetheft of the gun?7-4

Chapter 7 Case HypotheticalJason Binghamton is a huge fan of the Montana State Teacher’s College (M.S.T.C.) men’s basketball team, nicknamedthe “Flying Elk.” The M.S.T.C. team has enjoyed the best season in its 52-year history, and they are a favorite to winthe Lewis and Clark League (L.C.L.) men’s basketball title. In fact, the team has advanced to the L.C.L. men’sbasketball tournament championship, a contest against the Billings Technical College “Fighting Prairie Dogs.”Jason drives to the championship game at Lewis and Clark Stadium in Helena, Montana. He approaches the stadiumparking lot, and pays the attendant $25 for parking; in return, the attendant hands Jason a parking stub. On the backof the stub is the following language: “Lewis and Clark Stadium and the city of Helena shall not be held liable in anyway for loss of or damage to visitor’s property, including loss of or damage to automobiles parked in the stadiumparking lot. In accepting this parking privilege, the patron agrees that he will hold harmless Lewis and Clark Stadium,and the city of Helena, for such damage.” Jason does not read the language on the parking stub; instead, he placesthe ticket on his dashboard, parks his car in area B1 of the lot, locks the car doors and puts his keys in his pocket, andheads to the stadium.By all accounts, the game is the proudest moment in the history of the Flying Elk. They defeat the Fighting PrairieDogs 82 to 58, and Binghamton leaves the stadium ecstatic, knowing he attends a college of “winners.”Upon returning to his car, Jason’ happiness deflates to consternation and anger. His windshield has been shattered bya stuffed and mounted prairie dog that now lays upside-down in his driver’s seat, along with countless shards ofbroken glass. It is obvious to Jason that the “deed was done” by some disgruntled Fighting Prairie Dog fan, but thatindividual is probably well on his way back to Billings by now, and he will never be able to locate the criminal.Jason files suit against Lewis and Clark Stadium and the city of Helena, Montana, seeking to hold the defendants“jointly and severally” liable for the damage to his automobile. Will he win the lawsuit?

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Chapter 7 Case Hypothetical and Ethical DilemmaJohn “Jack” Franklin and Ruby Huss are next-door neighbors. Jack’s narrow road from thestate-maintained highway to his house is approximately two-tenths of one (1) mile long, andruns along the edge of his property. On the left side of Jack’s road is a drainage ditch runningthe length of his road, while on the right side is the property line dividing the two neighbors’landholdings. One day, Ruby was out gardening (she loved to cultivate roses) and Jackapproached her with the following question “Ruby, I am going to have my road graveled, and Iwould like lay enough gravel to expand my road about four feet in width. I can’t expand it onthe left side because of the drainage ditch, so I was wondering if you would mind if I widenedthe road on the right side. It sure would mean a lot to me, since my road is so narrow right nowthat I have a hard time driving my truck up to the house.” This meant that the gravel wouldextend approximately four feet onto Ruby’s property.Ruby believed in the power and value of friendly neighborly relations. She responded, “YesJack, you may certainly do that. That gravel won’t do me or my property any harm. Tell Annand the kids (Jack’s wife and children) I said hello when you get back to the house.”Based on the facts presented, is Ruby’s four-foot-wide strip of land subject to Jack’s adversepossession of it? If the gravel remains on this strip of land for the statutorily-prescribed periodof time for adverse possession (twenty years in many states), will Jack become its owner?

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Chapter 7 Case Hypothetical and Ethical DilemmaTimothy Ackers is a “stay-at-home dad” living in Falling Waters subdivision in Olympia, Washington. Timothy’s wifeJulia earns a six-figure income at the largest accounting firm in Olympia, and both husband and wife feel fortunate thatone of them is able to stay at home with their two young children, four-year-old Hope and two-year-old Matthew.Timothy is part of the community watch organization in his subdivision, and as a stay-at-home parent, he has ampleopportunity to observe the daily neighborhood “goings-on.” For the past six months, Timothy has noticed heightenedactivity at the house down the street owed by the Penningtons (Clara and Jonathan;) approximately eight to twelvecars come and go from the Pennington driveway every day, and four months ago, handicapped access ramps wereinstalled at the front and back entrances to the home. On several occasions, Timothy has seen elderly people sitting inwheelchairs in the Penningtons’ front yard.Curious, Timothy knocks on the front door of the Pennington home one Monday morning. Clara Pennington answers.Ackers states “Good morning, Clara. I know the old saying that ‘curiosity killed the cat,’ but I can’t help myself. What’sgoing on at your house? Why are all the elderly people here? I though both of your parents were deceased, and Ithought Jonathan’s parents had ‘passed on’ as well. Are these people related to you?”Clara responds: “Timothy, Jonathan and I decided six months ago to open up an elderly care facility. We didn’t havethe money to purchase a separate building, so we decided to care for the elderly in our home. This gives me awonderful opportunity to stay at home, and I wouldn’t be able to do that just on Jonathan’s income. Plus, think of theadvantages for our clients. Isn’t this so much better than a regular rest home? These folks have cried tears of joy, andthey thank me every day for providing them the quality of care they had hoped for in their ‘golden years.’”Falling Waters subdivision is zoned exclusively residential. Should Timothy report the Penningtons’ zoning violation?What ethical issues are involved in Timothy’s decision?

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Real PropertyDefinition: Land and everything permanently attached to it

Interests In Real Property• Fee Simple Absolute: Right to possess for life anddevise (will) to heirs upon death; the most completeinterest in real property• Conditional Estate: Interest comparable to fee simpleabsolute, except that interest will terminate onoccurrence/non-occurrence of a specified condition• Life Estate: Granted for lifetime of an individual; rightto possess property terminates upon life estateholder’s death, and property will pass to anotherparty designated by original grantor7-10

Interests In Real Property(Continued)• Future Interest: Person’s right to propertyownership and possession in the future• Leasehold Estate: Right to possess (butnot own) property for a stipulated periodof time

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Nonpossessory Estates• Easement: Irrevocable right to use some part of another’s landfor a specific purpose, without taking anything from the land-Example: Utility easement• Profit: Right to enter another’s land and take part of the land,or take away a product of it-Example: Right to harvest timber• License: Temporary, revocable right to use another’s property-Example: Theatre ticket

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Voluntary Transfer of Real PropertyRequires:• Execution—preparation and signing of deed;• Delivery—of deed to grantee, with intent oftransferring ownership to grantee;• Acceptance—grantee’s expression of intent topossess and own property• Recording—filing deed with appropriate county officeto protect interests of grantee7-13

Types of Involuntary Transfers:• Adverse Possession: When person openly treatsreal property as his/her own, withoutprotest/permission from real owner, for statutorilyestablished period of time, ownership isautomatically vested in that person• Condemnation: Government acquires ownershipof private property for “public use” for “justcompensation” over the protest of the propertyowner

Trademark• Definition: A distinctive mark, word, design, picture, or arrangementused by seller in conjunction with a product and tending to causeconsumer to identify product with producer• Mark must be registered with U.S. Patent and Trademark Office; markmust be renewed between fifth and sixth years, and after initialrenewal, every 10 years• Remedies for mark infringement:-Money Damages-Injunction• Trademarks used in interstate commerce protected under Lanham Act

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Trade Dress• Refers to the overall appearance and image ofa product• Entitled to same protection as trademark• Main focus of trade dress infringement case iswhether there is likely to be consumerconfusion in the comparison of two products

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Copyright• Protects the expression of a creative idea• Examples of copyrighted material include books, periodicals,musical compositions, plays, motion pictures, sound recordings,lectures, works of art, and computer programs• Criteria for a work to be copyrightable:-Fixed (Set out in a tangible medium of expression)-Original-Creative• Remedies for copyright infringement:• Money Damages• Injunction7-20

The “Fair Use” DoctrineProvides that a portion of copyrighted work maybe reproduced for purposes of “criticism,comment, news reporting, teaching, scholarships,and research”

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“Fair Use” Factors• Purpose and character of use, including whetheruse is of a commercial nature or for nonprofiteducational purposes• Nature of the copyrighted work• Amount and substantiality of portion used inrelation to copyrighted work as a whole• Effect of use on potential market for or value ofcopyrighted work7-22

• Lanham Act—allows patent holder to license use of idea forroyalties, provided that holder does not enter into “tyingarrangement” or engage in “cross-licensing”7-23

Trade Secret• Alternative to patent protection• Definition: A process, product, method of operation, or compilation ofinformation that gives a businessperson an advantage over his or hercompetitors• Remedies for trade secret infringement:-Money Damages-Injunction• Allows holder to sue for violation, if owner can prove:-Trade secret existed-Defendant acquired trade secret through unlawful means-Defendant used trade secret without plaintiff’s permission